The explosion at around 5:40 pm (1440 GMT) was heard across Arbil, the Kurdish regional capital to which the mostly Christian town of Ainkawa is contiguous, and sent a large plume of black smoke into the sky.
A car bomb blast near the US consulate in Iraq's autonomous Kurdish region killed three people and wounded five on Friday, Kurdish officials said.
Local television showed a burning vehicle near the entrance of the US consulate.
The relatively stable autonomous Kurdish region has mostly been spared the car bombings that have plagued other parts of Iraq on an almost daily basis.
The last major such attack was a suicide car bomb blast near the governor's compound in Arbil in November.